After months of searching, you’ve found your dream home, and you’re ready to make an offer! It’s an exciting time but are you as prepared as you can be to make an offer?
Understanding the offer process could be the difference between a stressful experience and a joyful one. So, to make sure everything goes off without a hitch, it’s worth getting all your ducks in a row.
First of all, some background about real estate transactions. When you make an offer on a property, this means you are buying a property via private treaty rather than auction. Once you have submitted your offer, negotiations with the vendor over price and conditions will likely follow. These negotiations usually take place via a real estate agent until a price and conditions are agreed upon.
If you bid for a property at auction, the contract is unconditional, which means that you accept the purchase at the terms and conditions already laid out.
Now, let’s get prepared to make an offer.
Have pre-approval in place
Ideally, it is best to have a pre-approval in place from your chosen lender before you even start seriously looking for a property. This will help you understand your financial position so you can make sure you are working within a realistic budget.
In a competitive market, having a pre-approval in place will make your offer more appealing to the vendor. It shows that you have the means to go through with the contract, and your finance is likely to be approved quicker. If a vendor has several offers on the table, they will likely consider the ease and speed of the deal in addition to the price offered.
Get a building and pest inspection
You do not have to have a building and pest inspection when you buy a property, but it is an excellent idea. Building and pest inspections will ensure that the property is up to code, there are no pest problems, and no potential building issues are brewing. Unfortunately, once you have purchased a property, there is no recourse if you find an issue. Building issues can be costly, and you may end up with a property you can’t afford to fix, and you also can’t sell.
You can include a clause on your offer to make it subject to a satisfactory building and pest inspection, much in the same way that your offer will likely be subject to finance. If the vendor or real estate agent tries to pressure you not to have this clause, think twice about their motivations.
Consider what other conditions you might like to include
Making an offer isn’t just about the price. You also have the right to include conditions. This is called a conditional offer. It is common to include conditions such as finance approval, the completion of relevant inspections, any maintenance you’d like completed before settlement or chattels you’d like included. Consult with your conveyancer about how to include these. Speaking of conveyancers…
Engage a conveyancer early
A conveyancer doesn’t just do the paperwork. They are there to help you navigate your rights and responsibilities as a property purchaser. Buying a property is a big deal. It is probably the most amount of money you’ll spend in a single transaction in your lifetime. You’ll want someone in your corner to make sure it all goes smoothly.
Once your offer is accepted, it is immediately legally binding. Engaging a conveyancer at the start will ensure you make an offer that works for you. They will also help you mitigate any issues around the agreement.
Review the contract of sale
Your conveyancer can also help with this. The contract of sale sets out the terms and conditions of the sale, including the vendor’s conditions. You should review the contract of sale before you formally submit your offer because once your offer is accepted, the contract of sale is legally binding.
They can be complicated documents and include legal terms that aren’t part of our everyday vernacular. Your conveyancer will be able to highlight unusual conditions or anything that might impact your enjoyment of the property, such as easements and encumbrances.
The contract of sale will also set out the deposit amount and due date, settlement date and any inclusions.
Making an offer & negotiating
When deciding how much to offer for a property, you will need to decide what your financial limit is. Make sure you consider the costs of buying a property aside from the purchase price. This includes stamp duty, moving costs, legal fees and any renovation work you want to undertake. Make sure that you have enough funds to cover these costs on top of your purchase price.
Do your research. Look at other comparable properties on the market as well as recent sales in the area. Try to find out why the property is being sold and why the price has been set as it is. The more information you have, the more power you will have in the negotiation process.
It is rare for your first offer to be accepted, so be prepared for negotiation. Try not to let your emotions take over in this process, make logical decisions based on your budget and likely future financial position.
Finally, always put your offer in writing. It shows you are genuine, allows you to include any conditions and provides legal protection.